Vietnam power snapshot: Solar power will slow down?

According to the PDP8, the potential capacity of Vietnam's solar power could reach 1,646GW (1,569GW ground-mounting and 77GW floating). Photo: Trung Nam group's solar power project.

According to the PDP8, the potential capacity of Vietnam's solar power could reach 1,646GW (1,569GW ground-mounting and 77GW floating) due to (1) Vietnam's solar energy intensity is around 5kWh/m2; (2) Average sunshine at about 150kcal/m2 and could last between 2,000-5,000 hours/year. However, considering construction abilities and economic aspects, the potential to build a large solar power project is 368GW and located ideally at the Southern, Southern Central, and Highlands provinces such as Ninh Thuan, Binh Thuan, and Dak Lak.

In 2020, the total solar power capacity (including rooftop solar power) increased sharply by 256% YoY from 4,696MW to 16,640MW. Moreover, its output also performed impressively by rising 98% to 10.6% of total output in 2020. According to EVN, rooftop solar power continued to grow from 7,780MW to 9,580MW, and ground-mounting increased 26% to 3,281MW from 2020 to 7M21. 

Notably, total solar output increased significantly to 16.2bn kWh, 34% higher than the entire output level in 2020. Along with other renewable energy (excluding hydropower), the strong emergence of this solar power is inevitable when traditional power sources are running out of their domestic fuel, and hydropower remains no space for growth. 

Moreover, the transformation in capacity structure is the preparation for a greener era in the following years. Under the PDP8, solar power will increase at 5% CAGR from 16,640MW to 55,090MW in 2020-45F, accounting for 20% of total capacity in 2045F.

On behalf of the strong growing intensive in 2020, several RE power companies take the chance to widen their capacity quickly, and its output benefited from the government prioritization from the beginning of 2021, including Trung Nam, Xuan Thien, REE, HDG, GEG, BIM group, Phu Cuong. These companies are currently the top player in RE market and experienced solid growth from their power segment in 1H21. 

However, VNDirect expected solar power development would slow down from 2022F due to the elimination of FIT price and excessive capacity. At the moment, solar power prices are processed under Decision No.13/2020/QD-TTg, in which, price is around 20-30% lower than the previous FIT price in Decision No. 02/2019/QD-TTg. However, the FIT price has shown its weakness by encouraging investors to join this segment. Thus, it led to massive growth in solar power capacity, putting heavy pressure on the transmission grid, and EVN has been forced to cut down the capacity of several solar power plants in recent months. At the moment, the Ministry of Industry and Trade is developing a bidding mechanism for RE power development. Accordingly, the FIT price for solar power will be removed, and the set price will vary depending on particular projects.

VNDirect expected capacity growth rate would reduce from 2H21, led by (1) reduction from an excessive rise in capacity in 2020, (2) government plans to remove the FIT price, and (3) FIT price due date expired since December 2020, creating no strong incentives for investors to invest in the following years.